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Oracle Class Wage Question Likely Headed To Arbitrator

By Cara Bayles Law360, San Francisco (November 7, 2017, 10:17 PM EST) -- A California federal judge said Tuesday she’ll likely grant an ex-Oracle worker’s request to let an arbitrator decide which of two employment contracts — one that allows for classwide arbitration or one that doesn’t — govern her claims over sales commission pay.

U.S. Magistrate Judge Elizabeth D. Laporte said at a hearing in San Francisco she would likely grant Marcella Johnson’s motion to compel arbitration against Oracle America Inc., and that an arbitrator would decide whether the first employment contract Johnson signed, which allows for class arbitration, is nullified by a second contract with a provision prohibiting the practice.

“I'm pretty settled on an outcome here,” Judge Laporte said. “The arbitrator was unambiguously delegated to decide threshold issues such as which contract applies. It’s not for me to decide which of these two agreements applies.”

Johnson originally filed her claims in California federal court, accusing Oracle of holding back $150 million in commission wages owed to sales employees by changing commission formulas that applied to past sales, sometimes even after the commissiosn had been paid. The commissions were reduced to align employee pay with the company’s “financial forecasts and bottom-line goals,” according to Johnson.

She voluntarily dismissed the suit after Oracle produced a mandatory arbitration agreement. She said she filed an arbitration demand with JAMS, as the agreement required, but that Oracle has “flatly refused” to participate in the process. Her motion sought an order compelling Oracle to arbitrate the action before JAMS in San Francisco, pay its designated share of the fees and participate in the selection of the arbitrator, plus an award of attorneys’ fees and costs.

At Tuesday’s hearing, Judge Laporte said she was bound by Ninth Circuit precedent, including Mohamed v. Uber and Oracle v. Myriad, which held an arbitrator must decide whether JAMS has jurisdiction over a case.

Oracle attorney Brendan Dolan of Vedder Price LLP argued the court must be the one to decide which one applies, and noted JAMS is “inordinately anxious” to do a classwide arbitration. He said Judge Laporte should find the second agreement trumped the first one. He told the judge this suit is different from the Ninth Circuit case law, because it involves deciding between two contracts.

Dolan said the fact that there are two agreements makes a difference under JAMS rules.

“Any of the potential applicable JAMS rules speak to a single agreement,” he said. “They talk about a single agreement and that, I contend, is a distinction that does make a difference in terms of the scope of delegation.”

The judge said that argument would have more traction if one of the agreements had an arbitration clause and the other didn’t, but both gave jurisdictional decisions to the arbitrator. She also said the question isn’t really “a plural situation” — an arbitrator needn’t decide between two contracts, but has to decide whether Johnson could assert claims under the first contract, or whether the subsequent one rendered it invalid.

Johnson’s attorney, Xinying Valerian of Valerian Law, agreed. She said no matter which contract is being considered, arbitrability was a threshold issue. Johnson submitted her arbitration demand under the first agreement, but the same body of arbitration questions could have come to JAMS “through other avenues,” Valerian said.

“We're talking about the jurisdictional issue of the enforceability of an arbitration agreement,” she said. “I think that squarely puts us within Mohamed.”

Should an arbitrator decide the second contract is the valid one, the judge said, the court might end up addressing the question of whether the provision barring class arbitration is valid. The plaintiffs had argued that clause is unenforceable under the Ninth Circuit’s 2016 decision in Morris v. Ernst & Young LLP, which found class waivers violate the National Labor Relations Act and is currently under review at the U.S. Supreme Court.

But Valerian added that the issue would not necessarily come before the court again, suggesting that if the arbitrator held that the second contract superseded the first, Johnson could still pursue her individual claims over Oracle estimating she would earn a negative commission balance of approximately $20,000 in 2014.

Valerian told Law360 she hopes the judge will “stick with her tentative ruling.”